Dan Ness, Principal Analyst, MetaFacts, March 30, 2017
Tech spending – it’s mostly driven by living in the moment, through month-to-month subscriptions and on-demand content. Spending on tech devices, while substantial, is only a fraction of annual household spending. Also, the biggest spenders are few in number.
During the full year of 2015, 90% of household technology spending was for services and 10% for devices. Total household tech spending averaged $7.9 thousand for the year. Most of this spending was concentrated among the top 25% of spenders. In 2015, the Top Quartile of adults spent $23.6 thousand on average for technology services and devices.
For these biggest tech spenders, services make up 93% of the technology spend. This is in contrast to the bottom quartile of spenders, whose spending is more equally balanced, with 63.6% going for services and 36.4% for devices.
After users have acquired their tech devices, bigger spenders add more technology services, and the services they use cost more than those chosen by lesser spenders. The bottom quartile of tech spenders is more likely to use fewer services and rely on fewer or unpaid connections, whether in libraries, cybercafés, or workplaces. Also, users in the bottom quartile are more likely to actively use refurbished devices than bigger spenders.
Are younger adults the biggest spenders?
It can seem handy to contend that younger people spend more on technology than older people. However, age as a predictor of technology usage, adoption, or spending is a myth that’s only partly true. Age alone doesn’t signify tech spending, although it’s a key predictive factor.
Life stage offers a more complete picture, as it combines age with employment status and the presence of children. One life stage segment stands out as the biggest tech spenders – adults age 18-39 who are employed and have children. At $13,097 on average for total tech spending in 2015, their spending is effectively double similarly-aged adults, whether employed or not, and with or without children in the household.
Older adults (age 40+) who are employed and have children in the household are the second-biggest life stage group, with an average annual spend of $9,193.
The remaining life stage segments are similar to each other in average spending levels – whether younger or older, employed or not, and with or without children in the household.
Tech spending – where the money goes
The majority of technology spending is in three categories – Internet services & equipment, mobile phones and service, and consumer electronics and content. Just over one-fourth (26%) of household technology spending went to internet services & equipment, routers, and modems to connect PCs and IoT devices to the Internet, as well as the various fees for ISPs and Internet services, such as cloud-based file storage and sharing.
Mobile phones make up nearly a quarter of spending (24%), including smartphones and basic cell phones, and cell phone service, data plan, apps, games, and related fees.
The third-largest household tech spending category is consumer electronics, spanning TVs to game consoles and TV/movie subscriptions, rental services, and games.
PCs and printers each represent 9% of household tech spending. PC spending is primarily for the hardware, as PC-related services are minimal. The reverse is true for printers, where most of the spending is on consumables such as ink and paper.
The technology spending mix for big spenders versus low spenders
Spending on consumer electronics is a higher share of spending among the biggest tech spenders than lesser spenders. The top one-fourth of connected adults who spend the most, spend 24% of their tech dollars on consumer electronics products and services. In stark contrast, the bottom quartile of spenders spends only 7%.
Instead, the bottom quartile have more of their dollars going to mobile phone devices and services – 34% – versus only 22% among the top quartile.
The share of tech spending for internet services and devices is nearly the same rate regardless of quartile, ranging between 25% and 27%.
For lower-income and lesser-spending households, smartphones and basic cell phones are almost a lifeline, often acting as the single or primary way to connect to the Internet.
Streaming and spending
A higher share of big spenders uses paid streaming services than by lesser spenders. This is especially true for video streaming, which is used by slightly over a quarter (26%) of the bottom quartile, versus 44% of the top quartile.
Paid music streaming is only slightly higher among the top quartile (80%) than among the bottom quartile (74%).
Interestingly, users of paid streaming music services also actively use free streaming music services. Although streaming music providers Pandora, Spotify, and others work hard to have collections that are large, popular, and current, many consumers have a healthier appetite and use more than one service.
Technology spending has continued to increase as a share of total household discretionary spending. We expect spending growth to continue, even among the bottom quartile of spenders.
Since internet service is such a large part of household tech spending for all, we expect any changes in these services to have a major impact on total spending.
The debate continues whether internet access is a privilege or basic human need. Organizations from retailers and hospitals to schools and governments continue to move more of their operations online to better and more cost-effectively support their customers and constituents. This will strengthen market demand, as ordinary citizens will increasingly rely on their technology devices and services for everyday shopping, education, and government services.
At the same time, the US Federal Government has recently announced policy shifts away from subsidizing further broadband adoption to more of the populace. Whether states or regional governments will move to make up what’s being reduced remains to be seen. While we expect demand and reliance on connectivity to increase, we’ll also see continued creative approaches by those most affected – the bottom quartile.
While hardwired connections support the broadest range of users, wireless bandwidth and coverage continue to increase for many. Capability continues to lag user demand, as data-hungry users broaden their Internet-intensive activities and collection of actively-used devices.
Even the top quartile of spenders rely on their high-speed connections and cell signal. Ask any accomplished yogi to momentarily forgo using their smartphone or (gasp) Wi-Fi and you’ll likely get a demonstration of their skills in managing their breath – and temper.
These results are based on the MetaFacts TUP/Technology User Profile 2016 survey, its 34th wave, with 7,334 respondents (US).
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